How long should you keep payroll records in the US?

Keeping accurate payroll records isn’t just a good habit; in the US, it’s a legal requirement.

For all employers, knowing how long to keep your payroll records — and complying with federal and state requirements — helps ensure that you can easily handle audits, and avoid penalties and other legal headaches.

But what exactly does your business need to do? In this article, we’ll break down which documents you need to keep, how long you need to keep them for, and everything else you need to be aware of. So let’s jump straight in.

What are payroll records?

Payroll records refer to any documentation related to paying your employees, including:

• Employee names, addresses, and Social Security numbers

• Hours worked (i.e., timecards and schedules)

• Wage rates

• Pay stubs and payment details

• Payroll tax forms (such as W-2, W-4, 941, and 944)

• Benefit and deduction records

• Direct deposit authorizations

• Employment contracts and changes in compensation

Why does payroll record retention matter?

Put simply, keeping payroll records helps protect your business and your employees. They serve as proof of wage payments, tax filings, and compliance with labor laws, and if you’re ever audited by the IRS or face a labor dispute, these records are your first line of defense.

Failing to keep payroll records for the required amount of time can result in fines, back pay settlements, or even lawsuits.

What are the IRS payroll record retention requirements?

The IRS recommends that employers keep employment tax records for at least four years after the date the tax becomes due or is paid (whichever is later).

These records include:

• Amounts and dates of wage and tax payments

• Employee copies of W-2 forms

• W-4 forms

• Records of fringe benefits and withholdings

These records help substantiate income, tax deductions, and payments in case of an IRS audit.

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What are the Department of Labor’s recordkeeping requirements?

As noted, the IRS only recommends that you keep the above records to make your life easier should you be audited.

However, the federal Fair Labor Standards Act (FLSA) requires all employers to keep basic payroll records for at least three years. For certain wage computation details (like time cards and piece work records), the requirement is two years.

For each employee, the required records include:

• Hours worked each day (and week)

• The basis of pay (e.g., hourly, salary, commission)

• Regular and overtime pay rates

• Total weekly earnings

• Deductions and additions

How long do you need to keep payroll records?

Here’s a full breakdown of what you need to keep (and for how long) at both the federal and state level:

Note that, in some states, the retention period requirements are longer under state law. If you have employees in the following states, you should retain payroll records accordingly:

To see a full breakdown of hiring and employment differences by state, check out our free US State Explorer tool:

How do you keep payroll records?

When adhering to payroll recordkeeping requirements, there are a few best practices you can follow to make the entire process easier, safer, and more efficient. Aim to:

• Go digital. Use a secure, cloud-based payroll platform to store and manage your records efficiently. This helps with organization, security, and disaster recovery.

• Create a retention schedule. Map out what records need to be kept and for how long, based on both federal and state guidelines. And automate reminders to audit and purge old files.

• Keep backups. Always maintain backup copies in a separate, secure location — either cloud-based or physical — to protect against data loss.

• Restrict access. Employee payroll information is hugely sensitive. Limit access to only those who need it, and implement strong authentication protocols.

• Document access and changes. Keep audit trails of who accesses or modifies your payroll records, especially if you have multiple HR or finance users.

• Stay compliant. Payroll laws change. Set a reminder to review federal and state retention guidelines annually, especially if you operate in multiple states.

How can Remote help?

Payroll compliance is an ongoing responsibility. By understanding and following payroll record retention requirements, your business reduces risk and stays audit-ready.

However, it can also be a time-consuming, resource-intensive process — especially for small employers juggling multiple hats.

With Remote Payroll, we make the entire process simple and painless. As well as running payroll seamlessly, we ensure you’re fully compliant with all local, state, and federal payroll tax and employment laws, and securely store your data and records for easy access. In the US, we even handle all registrations and reporting — and remit payroll tax payments on your behalf.

To learn more, speak to one of our friendly experts today.

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